Low Cost Carrier (LCC) AIR SEOUL has postponed the repayment of borrowed funds again, which it borrowed from its parent company Asiana Airlines. This marks the 18th extension of the maturity since first borrowing 30 billion won in June 2020. The total borrowed amount from Asiana Airlines is 60 billion won, which is not significant, but it indicates poor financial conditions, necessitating the postponement of repayments several times.
Industry observers note that since the merger of Asiana Airlines and Korean Air has been decided, AIR SEOUL is expected to accelerate integration with AIR BUSAN, another subsidiary of Asiana Airlines, and JIN AIR, a subsidiary of Korean Air, to address its financial situation.
According to the aviation industry on the 17th, Asiana Airlines held a board meeting the preceding day and resolved to extend the maturity of the 30 billion won loan to AIR SEOUL. Accordingly, the maturity of the loan has been extended by two months to March 24. The interest rate on the loan is 6% per annum, with monthly interest payments and a lump-sum repayment at maturity.
As of 2023, AIR SEOUL's total capital is -130.6 billion won, which has decreased by about 100 billion won compared to the previous year (-221.7 billion won), but it remains in a state of capital erosion. At the end of last year, its cash and cash equivalents were only 16.2 billion won. AIR SEOUL's liquidity ratio as of 2023 is 12.5%. Although this is an increase of 3.8 percentage points from the previous year (8.7%), it is still significantly low compared to JIN AIR (101.1%) and Jeju Air (45.3%).
Asiana Airlines' financial condition is also poor, making it reliant on Korean Air to improve its financial structure. Industry observers suggest that Korean Air will accelerate the integration of the three LCCs to improve AIR SEOUL's financial situation.
Korean Air has stated that expanding the fleet size and securing cost competitiveness is essential for the survival and sustainable growth of LCCs following the corporate merger, and it has expressed its position on integrated operations. On the 15th, through Hanjin Group's regular personnel appointment, a new representative was appointed for AIR SEOUL and AIR BUSAN from Korean Air.
Korean Air is planning to merge its subsidiaries within two years after the corporate merger. However, there are concerns that it will be difficult to accelerate this process due to opposition from the city of Busan and the local community, which holds shares in AIR BUSAN. A Korean Air official noted, "Specific schedules and plans for the launch of the integrated LCC will be established in mutual consultation with the three LCCs in the future," adding, "Currently, there is nothing confirmed."